Class 11 Private, Public and Global Enterprises

Private and public sector enterprises, the three forms of public enterprise, global enterprises, joint ventures and public private partnership.

Key ideas

The private sector is owned by individuals or groups; the public sector is owned wholly or partly by the central or a state government.

A departmental undertaking is run as part of a ministry, funded from the government budget and staffed by government employees, so it lacks flexibility.

A statutory corporation is created by a special Act; it has a separate legal existence, financial independence and its own staff, with powers set by the Act.

A government company is registered under the Companies Act, 2013, and governments hold at least 51% of its paid-up capital.

Global enterprises are huge firms working in many countries, with large capital, advanced technology, strong marketing and control from the head office.

In a joint venture two or more firms pool resources for a common purpose; it is contractual (no new firm) or equity based (a new, jointly owned company).

A public private partnership shares the resources, risks and rewards of a public project, such as a road or water supply, between the government and a private partner.

Remember

Government company test

central + state holding of paid-up capital ≥ 51%

Ownership in an equity joint venture

a partner’s contribution ÷ total contribution × 100

Shares of a PPP project

private partner: cost × its share% ÷ 100; the government pays the rest

Departmental undertaking

formed by a ministry; no separate legal entity; budget funding; civil servants

Statutory corporation

formed by a special Act; separate legal entity; financially independent; own employees

Government company

formed under the Companies Act; separate legal entity; directors appointed by the government

Benefits of a joint venture

more resources and capacity, new markets, technology, innovation, lower cost, an established brand

Watch out

Counting only the central government’s share: for a government company, add the central and state holdings.

Confusing a statutory corporation (made by a special Act) with a government company (registered under the Companies Act).

Calling every joint venture a new company: a contractual joint venture creates no new firm.

The central government holds 36% and state governments 21% of a company’s paid-up capital. (a) What is the total government holding? (b) Is it a government company?

Working: 36 + 21 = 57; a government company needs at least 51%

Answer: (a) 57%; (b) yes

Private, Public and Global Enterprises

Key ideas

Remember

Watch out

Worked example